Surviving the Economic Times: Ten Ways to Safeguard Your Small Business (Because No One's Bailing You Out!)
As the economy spirals downward, small business owners might be wondering if their companies will still be standing when this crisis has passed.
The current upheaval in the financial sector has many of us longing for the days when we were worrying only about an impending recession. As the U.S. economy continues its spiral to rock bottom and as the stock market remains highly unstable despite the passing of the $700 billion "rescue" plan, our situation is drawing comparisons to the Great Depression. If youre a small business owner, you are likely wondering if youll become a casualty of these economic end times. You do have a fighting chancebut you need to stop the handwringing and start taking aggressive action to safeguard your business.
Nothing is more stressful for a small business owner than talk of economic catastrophe. You start thinking about everything hanging in the balance, and if you arent careful you let your worries overwhelm your common sense. Rather than taking steps to safeguard your business, you find yourself paralyzed by anxiety.
Financial doom and gloom does not mean certain death for your small business. Once you accept that youre going to have to work very, very hardand that no one is coming to your rescue with a taxpayer-funded bailout packageyoull be ready to come out swinging.
You have to remember whos in control. Its you. And only you. As a small business owner, you should certainly know whats going on in the economy, but remember that you are the captain of your ship. And if you take the proper action, you can steer your business around this economic mess.
Here are a few small business safeguarding tips based on my decades of experience teaching and advising entrepreneurs:
(1) Obey the Golden Rule of Small Business: Protect your credit! As the credit crunch worsens, it is critical that you make sure your business has the best credit possible to ensure you can get a loan if you need one. Make absolutely certain you are paying your bills on time. Dont let anything fall through the cracks. If you are having trouble making a payment, let the company or bank know why. If there is a dispute on a payment, get something in writing that says you arent to blame. Being turned in to a collection agency will tank your credit score, something you absolutely cant risk.
(2) You cant show your employees the money, but you can show em the love. You need your employees to be on your side now more than ever. Show them every day how much you appreciate them. Youll be surprised how much goodwill a handwritten thank you note can create. And while you cant give raises to show your appreciation, there are other waysfor example, have lunch catered once a month or show up with doughnuts and coffee one morning.
Your employees know that money is tight, so they shouldnt be expecting raises or bonuses. But you can pull them together and let them know how much their hard work means to you. You can say, Thanks for a great job! when an employee goes the extra mile. Small gestures like these will let them know that you care about them and appreciate their hard work. Showing your thanks will help you build a better relationship with them, which makes it more likely that they will stick with you through thick and thin. Great employees are often the best defense in tough times.
(3) Make outstanding service your secret weapon. One area in which a small business should always excel is customer servicegood economy or bad. But when times are tough and customers have less money to spend, they really care that theyre getting a lot of bang for their buck. Theyll be looking to cut out those businesses that arent meeting their needs. As a smaller company, youll have an advantage over any larger competitors because you are better positioned to provide consistent, outstanding service. Small businesses just tend to be more flexible and can turn on a dime to meet client needs as they arise. Talk to your customers frequentlysee how you can help them in these tough times. The closer you stay to them the better!
(4) Figure out where you can cut expenses. Do a line item check of your expenses and really think about what you could do without. Some cuts may be obvious. For example, if you have cable TV set up in your office, that might be the first thing to go. But to figure out the less obvious expenses, be sure to involve your employees. Because they are on the front lines every day, they may have a better idea of what can be cut. For example, maybe theyve noticed that you have an incoming paper supply that could be reduced. If youre paying an expensive lease for office or warehouse space and your lease is up, you might want to consider moving to a smaller, cheaper space. Who knows? You could be able to get a good deal on an office lease or storage space. The real estate market is suffering right now, so more and more property owners are looking to make money on their properties any way they can. If your current lease isnt up and you are having trouble making ends meet, you might want to discuss a temporary renegotiation of your lease with your landlord that would allow you to pay less rent now and make up for it when your business improves.
(5) Keep abreast of the news in your sector or industry. Depending on what kind of business you have, different economic events will affect you in different ways. Find a reputable website for your business sector where you can get free news about your industry. Staying informed will help you know which way to navigate your business.
I do have one caveat in regard to staying informed. Dont get so bogged down in the news that you are back to your worrying again. Know enough that you are able to steer your company down the right path, but dont get so obsessed with reading every breaking news item that you get distracted from actually running your business.
(6) Re-examine your credit terms. You are running a business, not a charity. When times get tough you need to let your late-paying or no-paying customers know that it is time for them to pay up.
Tell them youll work with them to set up a payment plan that they are comfortable with. But hold them to it. Knowing the state of the economy, most of your customers will understand the situation you are in and will do whatever they can to pay you on time, especially if youve served them well.
(7) Manage your inventory. Keeping a close eye on your inventory will help you conserve cash and clean up your balance sheet. That way when credit loosens you will be among the strong firms that banks are willing to lend to.
While the economy is slow, dont purchase more inventory than you can sell. Find suppliers that can help you replenish inventory as you sell it. Its also a great time to unload any inventory that hasnt been selling.
Reduce prices on anything that has been on your shelves for a long time. Try to get what you can for it even if you dont make back everything you paid out. The product will be worth more to you if it puts some money in your bank account than it will sitting on a shelf in your backroom. Remember, in most cases inventory is not like wine; it does not get better with age.
(8) Keep an eye on your competitors. Theres no better time to know exactly what your competition is doing. If your competition seems to be thriving, figure out why. You might want to copy some of their techniques. If theyre not doing well, you need to know that too, for other (obvious) reasons.
If your competitors are struggling, they may well go out of business. Be there to snatch up their customers. Taking advantage of failing competition provides you with the unique opportunity to grow your business during a slow economic period.
(9) Get feedback from your customers. Keep communication lines open between you and your customers. Make sure you know how the bad economy is affecting them. Use surveys, comment cards, and one-on-one conversations to find out how you can better assist them during these tough times.
When youve gotten feedback from your customers, show immediate action in the areas theyve complained about. This will show them just how serious you are about great customer service. And if you take their suggestions and put them to action, they will feel like they have a hand in shaping your business so that it better meets their needs.
(10) Create an online presence if you havent already. A great way to stay in front of your customers and attract new ones is by maximizing your presence on the web. Make sure you have a great website that is easy to navigate and that makes it easy for visitors to purchase your products or contact you to discuss what your business can do for them.
Online marketing can also be a big help. Its cheap and allows you to send information about your business to a large number of people easily. For example, sending a marketing e-mail is an easy way to get in front of new customers. Just make sure your message is on point and that you are sending your marketing messages to people who would legitimately benefit from your business.
The economy is getting a lot of blame these days for sinking businesses. Im not saying its not making things harder for some companiesit certainly isbut it isnt a deal breaker by any means. Sometimes its just a convenient scapegoat. When you have a business with a good foundation and you take the necessary steps to protect your company, a small business can survive tough times.